Constructive dismissal is different than being fired.
Dismissal occurs when an employer tells an employee that he or she is fired whether the firing is with cause or without cause. Dismissal becomes wrongful dismissal if an employee is fired without cause and without reasonable, or any, notice of termination.
Constructive dismissal occurs when the employer by its conduct brings the employment relationship to an end without telling the employee that he or she is fired. That is where the “constructive” part of the phrase comes from.
It can be difficult to determine whether an employee has or has not been constructively dismissed. In general, there are two ways in which the employer can bring an employment relationship to an end without firing the employee:
- The employer breaches a term of the employment contract in such a way that a reasonable person in the same circumstances as the employee would view the breach as substantially changing an essential term of the employment contract. The “reasonable person” part of this test means that the employee’s personal reaction to the employer’s conduct may not be enough to determine whether or not a constructive dismissal has occurred – what seems substantial to a particular employee may be minor when viewed from the perspective of a “reasonable person”. Examples of substantial changes to an employment contract that may amount to constructive dismissal could include unilateral demotion; changed reporting functions or job responsibilities; reduction in pay; or imposition of a suspension.
- Even where the employer has not breached a term of the employment contract, the employer’s conduct would still lead a reasonable person in the same circumstances as the employee to conclude that the employer no longer wants to maintain the employment relationship. This could happen, for example, where the employer deliberately creates a hostile and unwelcoming workplace for the employee by engaging in prolonged, unfair criticism or discipline. Such an outcome would be distinct from a situation where an employer genuinely believes that an employee is doing a bad job and resorts to appropriate discipline or correction.
What are the implications of constructive dismissal?
An employee who believes that he or she has been constructively dismissed should seek legal advice before taking any other steps. Constructive dismissal is a complicated legal concept that can be difficult to navigate, and an employee who takes the position that he or she has been constructively dismissed before talking to a lawyer may damage his or her legal position.
Employers need to be careful that they do not expose themselves to claims of constructive dismissal as a consequence of organizational decisions, employee discipline, or restructuring. Employers of any size should talk to a lawyer before taking such steps.
TGC lawyers have experience dealing with constructive dismissal. If you are an employee or an employer dealing with a potential constructive dismissal situation, you should contact us today.